Non-Profit Organizations Will Now Be able To File a 2 Page Streamlined Application for Tax-Exempt Status

The IRS plans to implement Form 1023-EZ, a Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, during the summer of 2014.

Melissa with Brandon Schard – scholarship receipient

According to the IRS Tax Exempt and Government Entities Division (TE/GE), about 60 to 70 percent of applications for Code Sec. 501(c)(3) status are received from smaller organizations that will be eligible to use Form 1023-EZ. The proposed form is 2-1/2 pages long, compared to the 25-page Form 1023, which now must be completed by all organizations applying for tax-exempt charitable status.

The IRS will issue comprehensive instructions for filling out the form and for qualifying as a tax-exempt charity. The goal is to provide detailed instructions for the form so that people will know exactly how to fill it out. The instructions will walk applicants through every line of the form.

The IRS wants to streamline the application process and focus its resources on compliance. The application will provide sufficient information on the applicant’s organizational status that the IRS feels comfortable granting tax-exempt status. For organizations that file Form 990-EZ or Form 990-N (short versions of the annual reporting form), there is very little compliance risk. Therefore, it is not a good use of resources to focus on the applications for small organizations that are not yet operational.

The IRS will put more resources into compliance. What matters is how the organization is operating. The IRS is looking toward building a robust compliance process using compliance checks, contacts with taxpayers, and audit.

Provided by CCH

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